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Archbishop of Sydney Glenn Davies says Folau's right to express his faith and act according to his conscience is of "fundamental importance in any democracy".
"It is of great concern to many Australians that this right is being denied and vilified," Archbishop Davies said in a statement today.
Folau has been trying to build up a $A3 million ($NZ3.1 million) war chest from public donations to fund his legal battle against Rugby Australia, which terminated his $A4 million contract in May.
The decision by Rugby Australia came after Folau posted a biblical passage on social media saying "drunks, homosexuals, adulterers, liars, fornicators, thieves, atheists and idolaters" would go to hell unless they repented.
Folau said he had been the victim of discrimination on religious grounds and set up a GoFundMe page, which raised more than $A750,000 in about four days.
But GoFundMe shut it down on Monday because it breached its terms of service and said it would issue refunds to the more than 7000 donors.
A fresh fundraising effort was launched on Tuesday morning by the Australian Christian Lobby and by afternoon had received more than $A736,000 (NZ$770,400).
Archbishop Davies said while there are deeply held views on both sides of the issue, "at the moment, only one side is being heard".
"The way in which Folau's motives have been impugned and his avenues of support have been cut off smacks of a new and ugly Australia where dissent from narrow cultural views is not tolerated," he said.
Folau's original post came from a place of "deep conscience and concern" and not malice, the archbishop said.
"It had nothing to do with rugby and it should have been his right as a citizen to speak of what he believes without threat to his employment."
The clear support of ordinary Christians has been "ignored, marginalised and silenced", the archbishop says.
"Loud, intolerant voices swamp the quiet faith of many."
The archbishop said he prays the situation may shine a light on freedom of speech, freedom of worship and freedom to live according to faith.
Rabbi Jonathan Keren-Black said he was disappointed in the ACL's decision to throw $A100,000 behind Folau's legal case against Rugby Australia.
"All faiths have a variety of different approaches - I know many loving, caring Christians who would be horrified that that was being done in the name of Christianity," he told reporters in Sydney.
It's important to be aware of the pressures that youth - including those with gender identity issues - are facing, the rabbi said.
As young people grow up they need to be nurtured, supported and recognised for who they are, he said.
"Anybody in the public eye who speaks out against that is causing extremely dangerous upset and hurt."